ANTHONY J. BATTAGLIA, District Judge.
Currently before the Court are three motions: (1) the motion for summary judgment filed by the Jerry and Vickie Moyes
The Plaintiff, Pinnacle, is a Delaware LLC with its principal place of business in Illinois. Compl., Doc. No. 149, ¶ 1. Pinnacle's sole member is Marsha Forsythe-Fournier, a citizen of Illinois. Id. Defendant, the Trust, is an Arizona trust owned by the Jerry and Vickie Moyes family, citizens of Arizona that own various businesses in the transportation, entertainment, and real estate development industries and this collection of businesses are referred to as the "Moyes Group." Id. at ¶ 2.
Non-party MFC Investments, LLC (hereinafter "MFC"), is a Nevada LLC jointly formed by Pinnacle and the Trust as a 50-50 joint venture for the purpose of loaning money to, and managing the health club operations of a separate non-party Xeptor, LLC ("Xeptor"), an entity which owned and operated 22 health clubs in Arizona.
Non-party Deer Valley Capital, LLC (hereinafter "Deer Valley") is a part of the Moyes Group, and is an Alaska LLC with its principal place of business in Arizona. Deer Valley is the Trust's designated Manager under the LLC Operating Agreement for non-party, MFC.
Non-party Carefree Capital Investments, LLC ("Carefree"), is a Nevada LLC with its principal place of business in Arizona. Carefree's sole member is the Trust. Compl. ¶ 4.
On July 29, 2008, Pinnacle filed a complaint against the Trust, Deer Valley, and Carefree.
In this action, Pinnacle seeks: (i) a judicial declaration that Pinnacle and the Trust entered into a valid and enforceable Buy-Out Agreement whereby the Trust agreed to purchase Pinnacle's entire 50% interest in MFC; (ii) judicial enforcement of the Buy-Out Agreement; (iii) immediate payment to Pinnacle of all of the consideration due to Pinnacle under the Buy-Out Agreement; and (iv) compensatory and punitive damages for the Trust's alleged fraudulent conduct in connection with MFC and Xeptor.
The Trust in turn has asserted five counterclaims
The following description is taken from the parties' pleadings and is not to be construed as findings of fact by the Court.
During the summer of 2007, Pinnacle and the Trust organized MFC for the purpose of providing capital to Xeptor, which owned Arizona fitness and health clubs in financial trouble.
In October 2007, MFC and Xeptor also entered into a Second Amended and Restated Management, Loan and Standstill Agreement (the "MSA") effective as of August 6, 2007, pursuant to which MFC agreed to, among other things, manage the business of Xeptor and advance funds to Xeptor to run the fitness clubs through January 10, 2008, with the potential for MFC to acquire the assets of Xeptor.
Sometime after the Operating Agreement was executed, the relationship between Pinnacle and the Trust began to deteriorate. Compl., Doc. No. 149, ¶ 18-22. By late February 2008, MFC had invested millions of dollars into the operation of the gyms, yet the gyms continued to lose money. MFC's members had not successfully negotiated a resolution to any of the pending litigation. Pinnacle was negotiating with MH Holdings, the equipment lessor, and was attempting to resolve that litigation by selling MFC's interest to MH Holdings. [Trust's MSJ, Doc. No. 169, Ex 21, 22, 24.] The Trust was negotiating with Greenstreet regarding Xeptor's leases for the gyms. Greenstreet offered forgiveness of past due rent with the requirement that Xeptor vacate the premises or MFC sign new leases within 30 days. Adding to the mounting pressure was Greenstreet's deadline to accept the settlement by March 3, 2008. [Id., Ex 26; Ex. 2 at 87:12-88:19.]
The Trust contends that Pinnacle hoped to avoid settling with Greenstreet and delayed its consent in the hopes that MH Holdings would buy MFC's interest. [Trust's MSJ, Exs. 21, 22, 23, 24, 25, 27, 27A.] The Trust alleges that Pinnacle presented the Trust with a Consent Resolution two hours before the deadline to sign the Greenstreet settlement agreement, establishing a new management structure and directing MFC to sign new leases. [Id., Ex. 28.] To avoid the loss of the gyms altogether, the Trust "yielded" and agreed to the Consent Resolution. [Id., Ex. 29, 30 and 2 at 56:5-57:3.] That same day, Xeptor and Greenstreet entered into the settlement agreement. [Id., Ex. 31 and 33.] Greenstreet accepted the settlement agreement on March 6, 2008, and the deadline to sign new leases fell on April 6, 2008, a Sunday. [Id., Ex. 33.] The parties treated the deadline to sign new leases as Monday, April 7, 2008. [Id., Ex. 11 at 87:21-90:6; Ex. 49 at P10453-54; Ex. 46.]
The Trust contends that despite the Consent Resolution containing Pinnacle's commitment to sign new leases, along with a guaranty, Pinnacle continued to threaten liquidation of MFC in an effort to gain leverage in ongoing buyout negotiations between Pinnacle and the Trust. [Trust's MSJ, Ex. 2 at 15:19-16:18; 37:1-38:12; 66:1-15; Ex. 1 at 307:16-309:3, 362:14-363:2; Ex. 42.] On March 24, 2008, Mr. Shumway, the Trust's designated representative, offered to sell the Trust's interest in MFC to Pinnacle, or, in the alternative, for Pinnacle to sell its interest to the Trust. [Id., Ex. 41.] Pinnacle pursued a sale of its interest in MFC to the Trust and negotiations followed. [Id., Ex. 1 at 327:7-328:8; Ex. 42; Ex. 9 at 179:16-180:8; Ex. 45.]
The Trust contends that by April 7, 2008, the last day MFC could sign new leases,
The next day, on April 8, Mr. Shumway discovered that Ms. Fournier had sent an email at 12:01 a.m. on April 8 (10:01 p.m. on April 7 in Arizona), stating: "I vote `yes' on MFC signing the leases on the condition that Mr. Moyes has agreed in principle to purchase my 50% interest in MFC on the following terms." [Id., Ex. 1 at 363:3-15; Ex. 49 at P0010448.] The "I vote yes" email listed five terms, including a personal guaranty from Mr. Moyes and according to the Trust, at least one material alteration to Mr. Shumway's stated terms,
The Trust alleges that Ms. Fournier's conditional vote to sign leases was "too little, too late," because on April 10, 2008, counsel for Greenstreet declared that "MFC no longer has any right, and my clients have no obligation, to enter into the 2008 Leases or the related agreements." [Id., Ex. 11 at 88:20-90:6, 90:9-92:5; Ex. 52.] Greenstreet sent a letter to MFC's counsel, Bob Shely, on April 10, 2008 claiming the deadline had passed for MFC to sign the leases. Pinnacle contends that Greenstreet had already extended the deadline to April 9th, and had agreed to sign leases with Deer Valley and incentive agreements with Moyes on April 8, 2008. Pinnacle contends that Greenstreet's April 10 letter was simply an act aimed at protecting itself from liability from MFC.
Alternatively, the Trust contends that Greenstreet ended its relationship with MFC, because it no longer wished to do business with Pinnacle or Ms. Fourner. [Id., Ex 11 at 84:21-86:14, 88:7-92:5, 94:14-95:1; Ex 12 at 80:13-81:4; Ex. 18.] However, Greenstreet did offer to execute the leases with Deer Valley, an entity affiliated with the Trust, which the Trust had designated as Manager of MFC. [Id., Ex 11 at 92:23-97:24.] When Ms. Fournier learned that Greenstreet was contemplating leases with an entity other than MFC, she emailed Mr. Shumway to protest: "Until we have a binding agreement the leases need to stay in MFC's name...." [Id., Ex 50 at JM0000847.]
Nevertheless, Mr. Shumway executed leases with Greenstreet in the name of MFC's Manager, Deer Valley Capital, LLC. on April 10, 2008, which the Trust contends was consistent with the Consent Resolution and the parties' prior expressed intent to have an affiliate enter into the leases to operate the gyms.
Alternatively, Pinnacle alleges that it engaged in negotiations and reached an agreement with Shumway and the Trust in a `summary' email sent by Fournier on April 7, 2008, (the "Buy-Out Agreement"), that the Trust would purchase Pinnacle's 50% interest in MFC.
Pinnacle states that Fournier further clarified in two follow-up emails that the $504,077 was Pinnacle's half of the bond money and that Moyes had agreed to personally guarantee item number 3. [Id., Ex. 14 at 847-848.] Pinnacle contends that Shumways' communications after the parties' email exchanges regarding the Buy-Out Agreement indicate that Shumway and the Trust believed that a Buy-Out Agreement had been reached, as he stated "it is my understanding that we have a deal." [Id., Ex. 14.]
After the Buy-Out Agreement was allegedly reached, Pinnacle claims that the Trust and entities under its control, including Deer Valley and Carefree, seized control of MFC and its assets in a manner at odds with the fiduciary and contractual
Currently before the Court are three motions: (1) the motion for summary judgment filed by the Trust, [Doc. No. 169]; (2) the motion for partial summary judgment filed by Pinnacle, [Doc. No. 170]; and (3) the motion for judgment on the pleadings filed by Pinnacle, [Doc. No. 171].
The Trust moves for summary judgment on three categories of claims: (1) Pinnacle's Buyout Claims and the Trust's counterclaim for breach of contact; (2) Pinnacle's Non-Buyout Claims; and (3) Pinnacle's Damages Alleged for Non-Buyout Claims.
Summary judgment is appropriate where the record, when read in the light most favorable to the nonmoving party, demonstrates that "there is no genuine issue as to any material fact and ... the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Pursuant to Rule 56(c), the movant bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party satisfies this burden, the non-moving party must set forth, by affidavit or as otherwise provided by Rule 56, "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987). All reasonable inferences that can be drawn from the evidence "must be drawn in favor of the non-movant," John v. City of El Monte, 515 F.3d 936, 941 (9th Cir.2008), but only admissible evidence is considered. Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773 (9th Cir.2002).
In its first four causes of action, Pinnacle seeks to recoup its entire $3.5 million investment in the failed gyms by enforcement of a Buy-Out Agreement Pinnacle argues was reached solely through email correspondence in April 2008. The Trust contends that the parties did not reach an enforceable Buy-Out Agreement. The Trust argues that each of Pinnacle's Buy Out claims fail because: (1) Pinnacle's claim for breach of contract of the Buy-Out Agreement is void under the Statute of Frauds; (2) the parties did not form a contract by their preliminary negotiations; (3) Pinnacle cannot enforce the alleged Buy-Out Agreement based upon Promissory Estoppel; and (4) Pinnacle cannot demonstrate a breach or damages related to its Buy-Out claims.
The Trust argues that if there was no effective Buy-Out, Pinnacle remained a member of MFC and breached its obligations under the Operating Agreement and the Consent Resolution by failing to fund MFC and sign the Greenstreet leases. As such, the Trust contends it is entitled to summary judgment on Pinnacle's Buy-Out Claims and the Trust's counterclaim for breach of contact.
However, as set forth above, the Trust bears the initial burden of demonstrating the absence of a genuine dispute of material fact as to whether or not the parties reached a Buy-Out Agreement. The Trust has failed to carry this burden. The Court finds that a genuine dispute exists as to whether a Buy-Out Agreement was reached by the parties based upon the documents and emails cited to support the parties' conflicting positions set forth
The Trust moves for summary judgment on Pinnacle's Non Buy-Out Claims for breach of fiduciary duty, breach of contract, fraud, and unjust enrichment. Summary judgment is appropriate only where the record, when read in the light most favorable to the nonmoving party, demonstrates that "there is no genuine issue as to any material fact and ... the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The Trust bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the Trust satisfies this burden, Pinnacle must set forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987). All reasonable inferences that can be drawn from the evidence, must be drawn in favor of the non-movant.
The Trust argues that unlike Nevada's Partnership Act, which expressly imposes fiduciary duties amongst partners in a partnership, Nevada's LLC Act does not impose fiduciary duties on members of an LLC. See N.R.S. § 87.4336(1). The Trust contends that a member of an LLC, particularly a non-controlling, non-managing member, does not owe a co-member a fiduciary duty. The Trust argues that it had no fiduciary duty to Pinnacle because it was never a controlling MFC member. [Trust's MSJ, p. 14]. However, this argument is belied by the Trust's actions in April 2008 in naming Deer Valley Manager of MFC and the manner in which Deer Valley and Carefree, appear to have seized control of MFC in executing the leases with Greenstreet.
The Trust argues that Pinnacle's assertion that the Trust owed it a fiduciary duty is founded solely on the Trust's status as a member of MFC. [See Doc. 149, FAC ¶ 104.] However, the Operating Agreement does not impose any fiduciary duties on the members rather, it provides that MFC would be manager-managed; the appointed managers were granted "exclusive right and authority to direct, manage and control" MFC's business affairs. [Id., Ex. 15, §§ 6.1, 6.4.] The Trust argues it was never an MFC Manager and such, the Trust owed no fiduciary duties to Pinnacle and is entitled to judgment on Pinnacle's claims for breach of fiduciary duty and constructive fraud.. [Id., §§ 6.1, 6.2(a), Exhibit B.] However, as Pinnacle aptly points out, none of the other cases the Trust cites support summary judgment in its favor on this claim.
The Trust argues that Pinnacle's reliance on Bay Center is misplaced because Bay Center really analyzed fiduciary duties of a party with management control, not a non-controlling member such as the Trust. See also Kuroda v. SPJS Holdings, LLC, 2010 WL 925853 (D.Ch.) (criticizing as "entirely baseless" the prospect of imposing fiduciary duties on a non-managing LLC member which had no right to control company assets.)
Pinnacle argues that even if the Court does not find that the Trust owed Pinnacle a fiduciary duty as a matter of law, the evidence demonstrates that the circumstances created a fiduciary relationship. Pinnacle relies on In Executive Management, Ltd. v. Ticor Title Ins. Co., 114 Nev. 823, 963 P.2d 465, 475 (1998), where the court allowed a constructive fraud claim because there was evidence of misrepresentation and concealment. Pinnacle argues that where one party knows information that another does not, and is also aware that the other party has put its trust in it, that relationship gives rise to a confidential relationship, which, under Nevada law, is akin to a fiduciary one. See, e.g., Perry v. Jordan, 111 Nev. 943, 900 P.2d 335, 337-38 (1995) (cause of action for breach of confidential relationship valid); Allen v. Webb, 87 Nev. 261, 485 P.2d 677, 681-82 (1971) (one's superior knowledge gave rise to a fiduciary duty to other). Here, Pinnacle argues that the Trust conspired with gym employees to conceal material facts from Pinnacle, and accordingly, even if one did not exist before, Pinnacle argues that a fiduciary relationship was created by the Trust's acts. Because the Plaintiff has alleged that Deer Valley and Carefree seized control of MFC and the Trust designated Deer Valley the Manager
Pinnacle contends that the Trust breached the Operating Agreement: (1) by executing new leases and incentive agreements with Greenstreet without Pinnacle's permission; and (2) by using the gym's name, customer base, membership dues and equipment following entry into the new leases without Pinnacle's permission. [Doc. 149, FAC, ¶ 89.] Pinnacle's claim for breach of the implied covenant is based upon this same conduct, as well as the Trust's supposed "scheme" to take over the valueless gyms. [Doc. 149, FAC, ¶ 98.]
The Trust argues that its action, and the actions of Deer Valley and CAC, were consistent with the parties' agreement as reflected in the Consent Resolution, because the Consent Resolution directed MFC or its affiliate to sign new leases, which was the predicate to operating the gyms. The Trust seeks summary judgment that the conduct alleged did not violate the terms of the Operating Agreement. However, upon review of the Consent Resolution, the Court finds this argument both unsupported and unpersuasive.
Furthermore, Pinnacle has alleged numerous breaches of the operating agreement predating the alleged Buy-Out Agreement for which questions of fact preclude summary judgment.
Pinnacle contends that the Trust concealed material facts from and made material misrepresentations to Pinnacle throughout the course of MFC's existence, including (i) advising Pinnacle that the Trust would lead the November 2007 settlement negotiation meeting with Greenstreet; (ii) failing to disclose that the Trust "voted" to change the gyms names in November; (iii) failing to inform Pinnacle that Xeptor had signed the Consent & Authorization agreeing to change the names of the gyms; (iv) changing the gyms' names and operating them as the Coyotes Athletic Clubs; (v) that the Trust was working for its own benefit in negotiating
The Trust claims that Pinnacle's fraud claims should be dismissed because Pinnacle cannot establish the requirements of fraudulent concealment by "clear and convincing evidence." [Reply, Doc. No. 182, at 7.] Under Nevada law, the elements of fraudulent concealment are: (1) the defendant concealed or suppressed a material fact; (2) that the defendant was under a duty to disclose; (3) the defendant acted with the intent to defraud the plaintiff; (4) the plaintiff was unaware of the fact and would have acted differently if she had known of the concealed or suppressed fact; and (5) as a result of the concealment or suppression of fact, the plaintiff sustained damages. Rivera v. Philip Morris, Inc., 395 F.3d 1142, 1154 (9th Cir.2005). Each element of fraud must be proven by clear and convincing evidence. See, e.g., Nevada Power Co. v. Monsanto Co., 891 F.Supp. 1406, 1414 (D.Nev.1995).
The Trust bears the initial burden of demonstrating the absence of a genuine dispute of material fact with regard to its contention that the alleged frauds were not concealed and that Pinnacle was aware of the alleged frauds. Upon review of the record, the Court finds that the Trust has failed to carry its burden, because as set forth above, genuine disputes of material fact remain as to whether Pinnacle had knowledge of concealed or suppressed facts. Based upon the foregoing, the Trust's motion for summary judgment on Pinnacle's fraud claims is hereby DENIED.
The basis of Pinnacle's unjust enrichment claims stem from Pinnacle's contention that by agreeing to the Buy-Out and then reneging on it, the Trust was unjustly enriched by the use of Pinnacle's half of the bond money, which the Trust used for funding in June 2008, after the Buy-Out and after it had misappropriated the leases and incentive agreements. [Opp., Doc. No. 173, at 24.] Pinnacle contends that its unjust enrichment claim is further supported by the fact that the Trust promised to return the bond money to Pinnacle on multiple occasions
The Trust moves for summary judgment of this claim arguing that a claim for unjust enrichment applies only where there is no legal contract, because such claims must fail where an express written contract governs the parties' relations as to the matter in question. [Trust's MSJ at 13.] The Trust argues that the Operating Agreement, Consent Resolution and Nevada's LLC Act govern the parties' relations with respect to these matters. However, Pinnacle's claims stem from the alleged Buy-Out Agreement, which the Trust
The Trust argues that the damages allegedly suffered by Pinnacle as a result of the Trust's conduct including: (1) half of any tenant incentive payments received by the Trust; (2) the value of Xeptor's assets; (3) $2.75 million, the value of Pinnacle's half of the Xeptor promissory notes; and (4) Pinnacle's total investment in MFC; are, as a matter of law, not recoverable. [Id., Ex. 65, pp. 9-10.]
With regard to the tenant incentive payments, the Trust argues that Pinnacle cannot recover damages representing any portion of the tenant incentive payments because it is undisputed that the Trust never received any tenant incentive payments. [Id., Ex 1 at 367:4-15; Ex. 11 75:4-15.] Since Pinnacle does not dispute this fact, the Trust's motion for summary judgment on Pinnacle's damages claim seeking half of any tenant incentive payments received by the Trust is hereby GRANTED. Similarly, Pinnacle concedes that repayment of Fournier's initial $375,000 investment depended upon profits or receipt of incentive payments, which the Trust claims to have not received. Again, since Pinnacle does not dispute the fact that the precondition to repayment of the $375,000 was not met, the Trust's motion for summary judgment on Pinnacle damages claim seeking Fournier's initial $375,000 investment is hereby GRANTED.
With regard to Pinnacle's damages claims involving the value of Xeptor's Assets, the Trust argues that Pinnacle has failed to articulate the "value" of those assets or even make any effort to value those assets. See Ex. 1 at 75:1-77:12; Ex. 13 at 257:16-20. The Trust also argues that Pinnacle has failed to make the disclosures required by Fed.R.Civ.P. Rule 26(a)(3) regarding Pinnacle's valuation of these assets. However, despite the Trust's arguments, it is clear from the record that Pinnacle seeks the amount it funded in the Fall of 2007 for the purchase of gym equipment. Pinnacle and the Trust each funded $250,000 into MFC, which then provided Xeptor with $500,000 to purchase gym equipment. MFC secured a UCC lien in the amount of $500,000 on this gym equipment. Based upon the foregoing, the Trust's motion for summary judgment is DENIED as to Pinnacle's damages claim seeking the $250,000 it funded in the Fall of 2007 for the purchase of this gym equipment.
The Trust seeks summary judgment on Pinnacle's damages claim for the value of Pinnacle's half of the Xeptor Promissory Notes in the amount of $2.75 million. The Trust argues that Pinnacle has the burden to demonstrate damages with reasonable certainty
The Trust also argues that Pinnacle is not entitled to half the proceeds from the
However, as the movant, the Trust bears the burden of demonstrating that no material dispute exists as to any material fact and the Trust has failed to carry that burden here. Whether or not Xeptor's Promissory Notes were uncollectible is not dispositive of the value of Xeptor's assets when they were taken over by the Trust. Furthermore, since the Court has already found that there is a material dispute as to whether a Buy-Out Agreement was reached, it is unclear whether Pinnacle had any duty to continue to fund MFC. Based upon the foregoing, the Trust's motion for summary judgment on these damages claims is DENIED.
From the summer of 2007 until April 2008, Xeptor leased the property in which the gyms operated from affiliates of Greenstreet. On April 10, 2008, without the consent or approval of Pinnacle, an entity of the Moyes Group, Deer Valley Capital LLC, signed new leases with Greenstreet's affiliates for the properties in which the gyms operated.
Beginning in July 1, 2008, a new entity called CAC Holdings, Inc., which was owned by and affiliated with Mr. Moyes, began operating the gyms instead of MFC. As of July 10, 2008, the Trust no longer funded any money into the health club business, rather, Jerry Moyes individually began funding CAC Holdings.
Summary judgment is appropriate where the record, when read in the light most favorable to the nonmoving party, demonstrates that "there is no genuine issue as to any material fact and ... the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Pursuant to Rule 56(c), the movant bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party satisfies this burden, the non-moving party must set forth, by affidavit or as otherwise provided by Rule 56, "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987). All reasonable inferences that can be drawn from the evidence "must be drawn in favor of the non-movant," John v. City of El Monte, 515 F.3d 936, 941 (9th Cir.2008), but only admissible evidence is considered. Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773 (9th Cir.2002).
Under this standard, partial summary judgment "on all or any part of a claim" may be entered as to that portion of the claim.
Pinnacle contends that these damages are losses allegedly sustained not by the Trust, but by non-parties Jerry Moyes or CAC Holdings. Pinnacle argues that the undisputed evidence demonstrates that it was Jerry Moyes individually, and not the Trust, who made the capital contributions after the formation of CAC Holdings.
As set forth above, once the moving party satisfies the burden of demonstrating the absence of a genuine issue of material fact, the non-moving party must demonstrate, by affidavit or as otherwise provided by Rule 56, "specific facts showing that there is a genuine issue for trial" though admissible evidence,
The Trust opposes Pinnacle's motion and asserts, by way of an affidavit, that the Trust funded CAC Holdings from July 1, 2008 until the gym's closing, however, this assertion contradicts the Trust's own interrogatory answers.
The Court notes that this interrogatory response was submitted after Penrod testified that she did not recall whether anyone other than the Trust had funded CAC Holdings.
Based upon the foregoing, Pinnacle's motion for summary judgment that the Trust cannot recover as damages categorized as Operation Damages — CAC in the amount of $2,368,117.66 is hereby GRANTED.
Pinnacle also argues that the Trust cannot recover damages incurred by Deer Valley or Carefree Capital in the amount of $2,286,504.00, which are attributable to two stipulated judgments entered against Deer Valley and Carefree for unpaid rent under their lease agreements with Greenstreet affiliates for the gym properties.
However, the Trust contends that it suffered damages by: (1) funding Deer Valley's payment on the Greenstreet leases either directly (in June 2008) or through CAC (from July 1, 2008 forward);
The Trust argues that it is entitled to pursue its claims and resultant damages irrespective of the vehicle utilized to operate the gyms is reflected in the reality that Pinnacle has sued the Trust for actions undertaken by those very same LLCs.
Ultimately, however, the Trust does not provide any evidence of a legal obligation to pay the judgments against Deer Valley and Carefree. Because the Lease Damages that the Trust seeks were incurred voluntarily and not damages suffered directly by the Trust, the Trust cannot recover them in this lawsuit.
At issue in Pinnacle's motion for judgment on the pleadings, [Doc. No. 171], are the Trust's Third Counterclaim (breach of fiduciary duty), Fourth Counterclaim (tortious interference with contract), and Fifth Counterclaim (tortious interference with prospective business advantage). As a preliminary matter, the Trust states in its moving papers that it no longer intends to pursue its Fourth Counterclaim for tortious interference with contract, and as such, Pinnacle's motion for judgment of the pleadings as to the Trust's Fourth Counterclaim is hereby GRANTED. See Def. Opp., Doc. No. 174, at FN 1.
Fed.R.Civ.P. 12(c) provides, in relevant part, that "after the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." And, as courts of this Circuit have recognized, Fed.R.Civ.P. 12(h)(2) "specifically authorizes" a moving party to use a motion for judgment on the pleadings "to raise the defense of failure to state a claim, even after an answer has been filed." Aldabe v. Aldabe, 616 F.2d 1089, 1093 (9th Cir.1980) (affirming dismissal of action pursuant to Rule 12(c)). This is particularly true where a party has asserted the affirmative defense of failure to state a claim along with its answer, and thus, "the motion[] to dismiss [is] not based on new arguments for which [counter-claimant] could claim to have been unprepared." Id.; see also Martorello v. Sun Life Assur. Co. of Canada, No. C 09-0912, 2009 WL 1227011, at *3-4, 2009 U.S. Dist. LEXIS 41465, at *9 (N.D.Cal. May 1, 2009) (considering Rule 12(c) motion as motion for judgment on pleadings where answer raised defense of failure to state claim).
In deciding a Rule 12(c) motion, courts apply the same standard of review as with a Fed R. Civ. P. 12(b)(6) motion to dismiss.
MFC's Operating Agreement contains a forum selection clause ("FSC"). The Court has already concluded that the FSC contained in the Operating Agreement is valid, enforceable, and applies to all the claims alleged. [See Order Dated September 8, 2009, Doc. No. 17, at 12, lines 22-3.]
A California Federal District Court sitting in diversity applies California choice-of-law principles to determine which state's law to apply to particular claims.
Pinnacle contends that the governmental interests test applies to determine the proper law that applies to the Trust's tortious interference claims.
Pinnacle contends that, although Nevada law applies to the Trust's contract and breach of fiduciary duty counterclaims, Arizona law applies to the Trust's tortious interference with contract claim. Pinnacle is incorrect. Section 20.7 of the Operating Agreement provides that Nevada law will apply to all questions relating to the performance and interpretation of the Operating Agreement. [Trust's MSJ, Ex. 15 to the Trust's MSJ, § 20.8.] Here, the Trust's tortious interference with prospective business advantage claim is based upon Pinnacle's failure to timely and properly fund pursuant to the Operating Agreement and thus, directly relates to how the parties performed the Operating Agreement. [Doc. 50, Amended Answer and Counterclaim, ¶¶ 75, 76.] Direction can also be found from this Court's prior order that § 20.18 of the Operating Agreement (the forum selection clause) applied to all of Pinnacle's claims against the Trust, including the tort claims. [Doc. 17, Order, p. 7-8.] In so holding, the Court noted that application of the forum selection clause depended on whether "resolution of the claims relates to interpretation of the contract." [Id., p. 7.] There can be no legitimate debate that resolution of the
In the Third Counterclaim, the Trust alleges that "Pinnacle owed a fiduciary duty to MFC" and that "Pinnacle breached its fiduciary duty owed to MFC" in several different ways. [Counterclaim ¶¶ 64-65, Doc. 50, attached as Ex. D hereto.] The Trust does not allege in the Counterclaim that Pinnacle owed the Trust a fiduciary duty or breached any such duty to the Trust.
In its Fifth Counterclaim for tortious interference with prospective business advantage, the Trust claims Pinnacle interfered with MFC's prospective business advantages, not the Trust's. Specifically, the Trust alleges that Pinnacle interfered with MFC's ability "to increase the client base at the gyms and to substantially profit from such an increase;" "to manage the gyms;" and to continue to manage the gyms and acquire Xeptor's assets. (Counterclaim ¶¶ 75-77.) A claim for tortious interference with prospective business advantage must belong to the party asserting the claim.
Both of these Counterclaims allege only that Pinnacle owed a fiduciary duty to MFC
For the reasons set forth above, the Trust' Motion for Summary Judgment, [Doc. No 169], is GRANTED IN PART and DENIED IN PART; Pinnacle's Partial Motion for Summary Judgment, [Doc. No. 170], and Motion for Judgment on the
IT IS SO ORDERED.
MFC entered into a Management and Standstill Agreement ("Management Agreement") with Xeptor, pursuant to which MFC extended loans to fund the gyms' operations, manage the business, including the litigation, while MFC (or its nominee) decided whether or not to acquire Xeptor's "assets." [Id., Ex 16, §§ 1.3, 3.1, 5.3(A).]
See Doc. No. 170-4, Ex. E, at Interrog. No. 16.
